2 Contents The role of franchising in U.S & global economy What is a franchise?Types of franchisingThe pros & cons of buying a franchiseFranchising and the lawsThe right way to buy a franchiseTrends shaping franchisingGive a brief overview of the presentation. Describe the major focus of the presentation and why it is important.Introduce each of the major topics.To provide a road map for the audience, you can repeat this Overview slide throughout the presentation, highlighting the particular topic you will discuss next.
8 Figure 6.2 The Franchising Relationship ElementThe FranchiserThe FranchiseeSite selectionDesignEmployeesProducts and servicesPricesPurchasingAdvertisingQuality controlSupportOversees and approves; may choose siteProvides prototype designMakes general recommendations and training suggestionsDetermines product or service lineCan only recommend pricesEstablishes quality standards; provideslist of approved suppliers; may requirefranchisees to purchase from the franchisorDevelops and coordinates national ad campaign; may require minimum level of spending on local advertisingSets quality standards and enforces them with inspections; trains franchiseesProvides support through an established business systemChooses site with franchiser’s approvalPays for and implements designHires, manages, and fires employeesModifies only with franchiser’s approvalSets final pricesMust meet quality standards; must purchase only from approved suppliers; must purchase from supplier if requiredPays for national ad campaign; complies with local advertising requirements; gets franchisor approval on local adsMaintains quality standards; trains employees to implement quality systemsOperates business on a day-to-day basis with franchiser’s supportSource: Adapted from Economic Impact of Franchised Businesses: A Study for the International Franchise Association, National Economic Consulting Practice of PriceWaterhouseCoopers, (IFA Educational Foundation, New York: 2004), pp. 3,5.
34 Established Franchise Table 4.4 Advantages and Disadvantages of Buying a New vs. an Established FranchiseProsConsNew FranchiseCan be new and excitingBusiness concept can be fresh and different in the marketPossibility of getting lower fees as a “pioneer” of the conceptPotential for a high return on investmentBusiness is not tested or established in the marketUnknown brand and trademarkPossibility that the concept is a fad with no staying powerFranchiser may lack the experience to deliver valuable services to franchiseesEstablished FranchiseBusiness concept likely is well-known to consumers and market for the products or services is already establishedFranchiser has experience in delivering services to franchiseesFranchiser has had time to work the “bugs” out of the business systemHigh franchise fees and costs that often are non-negotiableConcept may be on the wane in the marketFranchiser’s brand and trademark may remind customers of an outdated conceptFranchiser’s “trade dress” may be in need of updating and redesigningSource: Based on Andrew A. Caffey, “Age Issues,” Entrepreneur, January p. 118.